Today’s supply chains are complex and interwoven. Most organizations rely on vendor relationships to streamline operations, grow, and cut costs. Besides the benefits of vendor relationships, organizations often must manage the risks arising from those partnerships, especially cybersecurity risks. A 2020 survey highlighted that 44% of businesses were hit by vendor-borne breaches, with each incident costing $3.92 million.
Typically, breaches happen because vendors access your critical systems and sensitive data. To secure these assets, tighter cybersecurity controls should be in place. There’s no better way to implement vendor risk management (VRM). It will minimize the chances of business disruption if a breach occurs. The vendor risk management process should get automated because it’s labor-intensive and time-consuming.
Why are businesses opting for VRM automation?
VRM is a vital element of your organization’s cybersecurity toolkit. Automating your VRM process improves your ability to detect and mitigate vendor risk besides delivering the following benefits:
1. Minimizing cybersecurity risk
Your third-party vendors employ different data security controls to safeguard their digital assets. Those with weak controls pose a threat to you, something VRM attempts to mitigate and manage. However, this requires considerable manual effort. Automating VRM will reduce your vendor’s cybersecurity risks while saving yourself from the hard work.
2. Accelerating vendor risk assessment
Thanks to the dynamic nature of modern supply chains, organizations must quickly evaluate the risks posed by individual vendors. However, the vendor risk assessment process is usually very slow. There’s also the risk of some vendor-related risks not being identified or eliminated. VRM automation provides an insight into how vendors are performing in their cybersecurity controls and the risks they bring to the table.
3. Enhancing vendor relationships and collaboration
To mitigate risks successfully, risk information should promptly get communicated to each vendor to address the risks on their end. The manual VRM process is cumbersome and makes the collaboration hard to execute. Automating VRM resolves the problem by allowing your vendors to understand what needs to be done to address risks.
4. Supporting scalability within the vendor system
Even if your organization doesn’t interact with many vendors, its vendor ecosystem grows by the day. Manual VRM cannot help you manage the growing ecosystem and the increased risk. Instead, your organization needs technology-driven automation for continuous monitoring and streamlining cybersecurity assessments for current and potential vendors. As your vendor ecosystem grows, VRM automation will help you address vulnerabilities, monitor security performance, and lower vendor risk.
What qualities should a VRM automation tool have?
Given that manual VRM is inefficient and can’t help you deal with risks posed by modern supply chains, automating the process improves your regulatory compliance posture. It also enables you to minimize the impact of vendor-borne risk. Nevertheless, this can only happen if the automated solution is centralized, scalable, and consistent. It also needs to have the following capabilities:
a. Data collection
An effective VRM solution should collect data and allow you to create and distribute vendor questionnaires. Likewise, the automated VRM solution you choose should come with a weighted scoring system for classifying your vendors according to their risk.
b. Business rules
There’s no better way to simplify vendor risk assessments than eliminating the need for human intervention when using a VRM solution. Therefore, ensure that the automated VRM you choose outlines business rules based on fixed thresholds. For instance, if a vendor collects your customers’ data, a rule may be triggered to prioritize cybersecurity risks associated with personal data collection.
c. Due diligence investigation
The ideal automated VRM solution should allow you to screen and monitor your vendors against a risk intelligence database. It should order, request, and keep records of due diligence investigations besides maintaining a historical record of relevant documentation and evidence to ease internal and external audits.
d. Customizable alerts and rule-based workflows
Rule-based workflows negate the need for manual checks, thus enabling you to maintain current compliance for all your vendors. Automated alerts bring your attention to critical tasks or approvals, thus strengthening your VRM process. It will be hard to identify tasks that require your attention without the customizable alerts.
e. Machine learning
An automated VRM tool powered by machine learning can learn from the decisions and actions taken by expert users. This analysis can also make similar decisions even when an explicitly defined model lacks. Since it’s needless to define multiple mathematical calculations or rules, the system can also strengthen and accelerate third-party vendor management, risk assessment, and mitigation.
Automation is a core component of the modern vendor risk management process. With an automated tool, it’s easy to perform hitherto tiresome and repetitive tasks such as due diligence and risk assessments. VRM automation increases visibility into vendor-borne risks through dashboards, risk heat maps, and regular reports. Furthermore, it makes it easier for you to continuously evaluate risks across your vendor ecosystem and monitor compliance-related risks.